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Mergers are getting done faster as volatility grows


November 3, 2008


Mergers and acquisitions are being completed almost twice as quickly as they were a year ago, according to new research, as volatile markets force bankers to rush merging companies from announcement to completion.

The average duration of M&A deals globally has fallen to 80 days for the first nine months of this year across all sectors, from 142 days last year, according to analysis from M&A consultant Towers Perrin using data from Mergermarket. Deal times between financial-services companies fell to 90 days from 134 days.

“The concept of seize-the-day is changing conventional M&A processes as the threat of future potential surprises pales next to the scale of savings or strategic value that might be achieved,” said Marco Boschetti, head of global M&A and restructuring at Towers Perrin.

“The risk inherent in that is not getting the pricing right,” said Larry Slaughter, co-head of M&A at J.P. Morgan.

Wells Fargo & Co. aims to complete its all-share acquisition of Wachovia Corp., announced Oct. 3, by the end of the year, a maximum of 90 days. Outside financial services, Royal Dutch Shell PLC’s $5.5 billion acquisition of Canada-based Duvernay Oil Corp., declared in July, was completed in 40 days.

The fall in transaction times comes as competition authorities have deferred to other parts of the government that are trying to facilitate rescue transactions amid the credit crisis. It also follows a record number of announced deals being pulled in the three months to the end of September. Some 297 deals were withdrawn globally in the third quarter, according to research provider Dealogic, the highest quarterly total since it started collecting data in 1995.

While the value of deals globally is down 20% so far this year at $3.2 trillion, the one-month premium, which reflects the leap in share prices that occurs when a deal is announced, continues to climb, averaging 31% last month, compared with 26% in September, according to Dealogic. The average one-month premium offered didn’t rise above 27% last year.

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